Ritholtz: “WSJ’s Jon Hilsenrath checks in on Mean Street with a simple list of reasons why the Fed, with regard to economic policy, is likely to remain parked for a long time to come”.
FT: Bondholders look for word of more Fed help – The pattern is now all too familiar and has been a regular feature since the financial crisis. Fears of systemic stress and weak US economic data spark dramatic declines in Treasury yields, followed by the Federal Reserve launching a new round of bond purchases, confirming the pre-emptive positioning of bond investors.
FT/Peter Fisher: Fed risks diminishing returns with more QE – There are four rationales that could explain why the Fed might now increase the size, or change the composition, of its balance sheet. While the Fed could act, it risks diminishing returns and perverse outcomes.
Sober Look: The TIPS Curve has Inverted – The US inflation indexed treasury curve (TIPS curve) has inverted sharply in the short end. The one-year TIPS yield went from negative 2.5% to zero in a matter of four months.
Barrons’: Buying Opportunity Seen as Muni’s Lag Treasuries – Citi’s muni mavens, George Friedlander and Vikram Rai, aver that munis aren’t cheap simply because their yields haven’t plunged as much as Treasuries’ but that the latter yields are distorted to the downside. They calculate the drop in muni yields has been about half as much as Treasuries’, with 30-year triple-A tax-exempts providing 120% as much as the 30-year T-bond, compared with the average of 104.5% over the past three months. They prefer the “belly” of the curve, high-quality credit and so-called kicker issues (high-coupon bonds subject to call in a few years.)
Reuters MuniLand: Who will Pay for New Infrastructure Spending? - Since yields on U.S. Treasury and municipal bonds are at record lows, it’s appealing for federal, state and local governments to finance projects with borrowed dollars. Lately, investors have favored bonds backed by dedicated revenue streams – there were $11.1 billion in bonds issued for water and sewer facilities in the first quarter, nearly four times more than the $2.9 billion issued for toll roads, highways and streets in the same period, according to the SIFMA Municipal Bond Report (page 7).
Bond Buyer: Market Post: Muni Yields Rise With Treasuries And Spike In Supply – “I’m hearing deals need a good amount of concessions to entice buyers,” a New York trader said. “But even in the secondary munis are weaker, especially on 10s and 30s. It’s partially due to weaker Treasuries and we definitely need concessions for munis to find a home.” Yields on the three- to five-year rose as much as two basis points. Outside six years, yields jumped between two and seven basis points.
Marketwatch: Treasuries fall on hopes of action in Europe – Yields on 10-year notes rose 6 basis points to 1.64%. A basis point is one one-hundredth of a percentage point. The benchmark securities closed at a record low around 1.47% on Friday. Thirty-year bond yields increased 9 basis points to 2.73%. Yields on 5-year notes added 5 basis points to 0.73%.
Bond Desk: Market Transparency Report for May - Lots of cool data from transactions on the bond desk system.
Bond Buyer: Stockton Council Takes Step Toward Chapter 9 – The Stockton, Calif. City Council voted Tuesday night to give its city manager the power to file for municipal bankruptcy if mediation talks with creditors prove unsuccessful.
The Big Picture: Beige Book Bullet Points.
ETFTrends: Why The PIMCO Total Return Fund is Outperforming the Mutual Fund – Some good quotes from our article on the topic.